Hezbollah Threatened by Iran’s Financial Woes

Iran’s economy continues to flounder. It is hemorrhaging money in Syria, and years of sanctions have left it suffering from high unemployment (a quarter of youth are jobless) and the world’s second-highest inflation rate (20 percent), despite a minor boost provided by an interim nuclear agreement. Now, however, Iran’s economic woes are beginning to affect its ability to project power across the region, potentially leaving its most dangerous international proxy in the lurch.

Sources close to Hezbollah told Lebanese media last week that Iranian funds to the group are drying up. In the words of Hezbollah expert Matthew Levitt, “Iran is not in good financial shape; the money from Tehran [to Hezbollah] doesn’t come as it used to.” As a result, the group’s military wing has reportedly ordered its overseas cells and external security units to find new revenue streams, and its social services have also had to cut costs.

Over the past three decades, Tehran has funded Hezbollah terrorism around the world, from its 1983 bombings of US and French barracks in Beirut that killed 299 servicemen, to attacks in the early 1990s at Jewish and Israeli centers in Argentina that killed 114. That relationship has continued to this day—in 2012 Hezbollah bombed an Israeli tourist bus in Bulgaria, killing six, and the same year planned a similar attack in Cyprus. The group has been accused of attacking diplomats as far afield as India and Georgia, and last month its operatives admitted to plotting attacks on tourists in Thailand.

At the same time, Hezbollah also operates a global network of criminal and narcotics rings. In West Africa, it has made millions trading in blood diamonds and arms. In Colombia, its members have been convicted of cocaine trafficking, and in the lawless border areas between Argentina, Brazil, and Paraguay it runs smuggling networks transporting marijuana and tobacco. In the US, officials have uncovered a multimillion-dollar Hezbollah-run smuggling ring dealing in drugs and cigarettes.

As less money comes in from Iran, Hezbollah will likely have to turn to these illicit operations even more to make up the shortfall. Last week, however, a bill was introduced to the US Senate that seeks to challenge the group’s money-laundering and logistics operations, designating Hezbollah as a narcotics-trafficking and transnational criminal organization. The bill would place sanctions on individuals and firms conducting any business with Hezbollah, severely hindering the organization’s ability to fundraise at a time when its coffers are already drying up.

With its diminished financial prospects, Hezbollah’s overseas cells could face an accompanying decline in the group’s ability to conduct both terror attacks and criminal activity. The failure of its recent attacks in Cyprus, India, Georgia, and Thailand indicate that its operational capacity is already compromised—something money troubles will only exacerbate.

Meanwhile, Iran continues to bankroll the Syrian government in its brutal three-year war against rebel forces. Tehran is believed to provide the Bashar al-Assad regime with upwards of $600 million monthly to prosecute the war and cover its fiscal deficit. For its part, Hezbollah is itself losing money, pledging to provide for the families of up to 500 of its fighters killed in battle alongside Syrian forces.

Rogue behavior carries costs. The Islamic Republic’s nuclear program has devastated its economy, raising fuel, food, and energy prices for ordinary Iranians. Its three-year campaign to save the Syrian regime is bleeding its bank accounts, and damaging its ability to fund terror beyond its borders.

The Syrian tragedy has claimed as many as 160,000 lives, with no end in sight. Still, in the dark clouds above Damascus a silver lining may be emerging: the weakening of the Islamic Republic and its most dangerous proxy.

Oren Kessler and Rupert Sutton are research fellows focusing on the Middle East at the Henry Jackson Society, a London-based think tank.